United States Court of Appeals
For the First Circuit
No. 18-1694
RAFAEL LÓPEZ-SANTOS and ERASMO DOMENA-RÍOS,
Plaintiffs, Appellants,
v.
METROPOLITAN SECURITY SERVICES,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Francisco A. Besosa, U.S. District Judge]
Before
Thompson, Lipez, and Barron,
Circuit Judges.
Judith Berkan, with whom Mary Jo Mendez and Berkan/Mendez
were on brief, for appellants.
Luis R. Pérez-Giusti, with whom Liana M. Gutiérrez-Irizarry,
Adsuar Muñiz Goyco, and Seda & Pérez-Ochoa, P.S.C., were on brief,
for appellee.
July 23, 2020
LIPEZ, Circuit Judge. Appellants Rafael López-Santos
("López") and Erasmo Domena-Ríos ("Domena") served as court
security officers for the District of Puerto Rico for thirty-two
years. Their tenures ended in 2015 when appellee Metropolitan
Security Services d/b/a Walden Security ("Walden") assumed the
federal contract to provide courthouse security services and
refused to hire them because they lacked certification from a law
enforcement training academy. After López and Domena brought suit
for statutory separation pay pursuant to Puerto Rico Law 80, the
district court granted summary judgment for Walden.
On appeal, López and Domena argue that the district court
conducted the wrong legal analysis and that Walden should be held
liable pursuant to Puerto Rico's common law successor employer
doctrine. We agree that the district court misconstrued López and
Domena's theory of liability, leading it to conduct a largely
irrelevant analysis of their claims, but we nevertheless affirm.
Although we recognize the unfortunate loss of livelihood
experienced by López and Domena, the successor employer doctrine
is simply inapplicable to their case, leaving them with no remedy
pursuant to Law 80.
I.
The following facts are undisputed by the parties. López
and Domena both began work as court security officers ("CSOs") in
1983. They were among the original thirteen CSOs serving the
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District of Puerto Rico and received multiple accolades for their
excellent work.
The United States Marshals Service ("USMS") drafts and
manages the federal contract governing court security services for
the District of Puerto Rico. The USMS awards the contract to
private security companies, and those companies in turn hire CSOs
to provide the District of Puerto Rico courthouses with armed
security guard services. During the thirty-two years that López
and Domena worked as CSOs, a number of different private security
companies held the USMS contract at various times, and López and
Domena worked for all of those companies.
In September 2015, the USMS awarded the contract to
Walden, effective December 1, 2015. The contract set forth the
minimum qualifications for CSOs employed by the contractor.
Specifically, it stated:
[E]ach individual designated to perform as a
CSO [shall] ha[ve] successfully completed or
graduated from a certified Federal, state,
county, local or military law enforcement
training academy or program that provided
instruction on the use of police powers in an
armed capacity while dealing with the public.
The certificate shall be recognized by a
Federal, state, county, local or military
authority, and provide evidence that an
individual is eligible for employment as a law
enforcement officer.
The record demonstrates that this same language had appeared in
the USMS's contract with Akal Security, Inc. ("Akal"), the
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contractor immediately preceding Walden, as well as the contract
with MVM Security ("MVM"), the contractor immediately preceding
Akal.
In October 2015, Walden convened two meetings for all of
the CSOs who were then employed by Akal. During the meetings,
Walden provided information about its company policies and
benefits and invited all of Akal's CSOs to submit employment
applications to Walden. López and Domena attended Walden's
meetings and submitted applications. However, neither of them had
completed or graduated from a certified law enforcement training
academy, as required by the USMS contract with Walden. This fact
was reflected in their applications, both of which requested a
waiver of the certification requirement.
On November 30, 2015, the Vice President of Walden's
Federal Services Division notified López and Domena that they were
ineligible for Walden's CSO positions because they failed to
satisfy the certificate requirement. They were the only two Akal
CSOs not hired by Walden. As of December 1, 2015, they were out
of a job.1
1
It is not clear why the lack of certification did not become
an issue when López and Domena were hired by Akal and MVM, but
there is no evidence in the record suggesting that anyone ever
questioned the qualifications of López and Domena during the
fourteen years that MVM held the USMS contract, and the two to
three years that Akal held the contract.
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Thereafter, López and Domena, along with other members
of the courthouse community, tried to dissuade Walden from
enforcing the certification requirement against them. Roberto
Santiago, the site supervisor under both Akal and Walden, spoke
with Walden representatives about López and Domena's extensive
experience and stellar employment records, demonstrating that they
had "the sufficient skills and knowledge to be CSOs." Then-Chief
Judge Aida M. Delgado-Colón and Judge Carmen Consuelo Cerezo asked
the USMS to waive the certificate requirement for López and Domena
in light of their long history of impeccable service.2
After all of those efforts failed, López and Domena filed
the instant lawsuit for statutory separation pay pursuant to Puerto
Rico Law 80, invoking the federal district court's diversity
jurisdiction. See 28 U.S.C. § 1332(a)(1), (e). In November 2017,
the parties filed cross motions for summary judgment, agreeing
that the relevant facts were not in dispute. The district court
granted Walden's motion, reasoning that Law 80 did not apply to
López and Domena's claims. See López-Santos v. Metro. Sec. Servs.,
2In a letter to Judge Cerezo, the USMS took the position that
because López and Domena were employees of Walden and not the USMS,
the USMS would not instruct Walden to waive the certificate
requirement; rather, Walden would have to affirmatively request
that the USMS waive the requirement. At oral argument, counsel
for Walden represented that Walden never asked the USMS for a
waiver because Walden did not interpret the contract as permitting
such a waiver. López and Domena dispute that interpretation of
the contract, but the dispute is not material to our analysis.
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Inc., 320 F. Supp. 3d 338, 343-44 (D.P.R. 2018). López and Domena
timely appealed.
II.
A. Legal Framework
We review a grant of summary judgment de novo, construing
the record in the light most favorable to the non-moving party.
See Lapointe v. Silko Motor Sales, Inc., 926 F.3d 52, 54 (1st Cir.
2019). As a federal court sitting in diversity jurisdiction, we
must apply state substantive law to assess whether summary judgment
is appropriate. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78-
79 (1938). Accordingly, Puerto Rico law governs the substantive
issues in this appeal. See 28 U.S.C. § 1332(e) (treating the
Commonwealth of Puerto Rico as a state for purposes of diversity
jurisdiction).
Puerto Rico Law 80 imposes a monetary penalty, commonly
known as the "mesada," on employers who discharge employees without
"just cause." See P.R. Laws Ann. tit. 29, § 185a (2015)3 ("Every
3All citations to Law 80 are to the version of the law in
effect in 2015 when Walden refused to hire López and Domena. Law
80 was amended in significant ways in 2017, but the amendment does
not contain a statement of retroactivity, see P.R. Laws Ann. tit.
29, §§ 185a-185n (added on Jan. 26, 2017, No. 4), nor do the
parties suggest that it should be applied retroactively. See,
e.g., Hughes Aircraft Co. v. U.S. ex rel. Schumer, 520 U.S. 939,
946 (1997) (applying the "time-honored presumption" against
retroactivity where "[n]othing in the [statutory] amendment
evidences a clear intent by Congress that it be applied
retroactively, and no one suggests otherwise").
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employee in commerce, industry, or any other business or workplace
. . . in which he/she works for compensation of any kind,
contracted without a fixed term, who is discharged from his/her
employment without just cause, shall be entitled to receive from
his/her employer, in addition to the salary he/she may have earned:
[various forms of compensation]."); Otero-Burgos v. Inter Am.
Univ., 558 F.3d 1, 7-8 (1st Cir. 2009) (describing the "mesada"
and the operation of Law 80). In this manner, Law 80 modifies the
concept of "at-will" employment, which traditionally permits
employers to dismiss employees who do not have a contract for a
fixed term "for any reason or no reason at all." See Otero-Burgos,
558 F.3d at 7 (internal quotation marks omitted).
Because Law 80 provides compensation for "discharge
without just cause," a plaintiff invoking Law 80's protection must,
as a general rule, demonstrate as a threshold matter that he or
she had an employment relationship with the defendant entity and
that the defendant entity terminated that relationship through a
"discharge." See P.R. Laws Ann. tit. 29, §§ 185a, 185e (emphasis
added). However, there are two exceptions to this requirement.
First, pursuant to Article 6 of Law 80, after the sale
of a business, "[i]n the event that the new acquirer chooses not
to continue with the services of all or any of the employees and
hence does not become their employer, the former employer shall be
liable for the [mesada]." See id. § 185f. Under those
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circumstances, although the seller did not technically "discharge"
the employee -- rather, the seller failed to protect the employee
in the contract of sale, and the acquirer subsequently declined to
hire the individual -- the seller is liable to pay the mesada
pursuant to Article 6. See id.
Under the second exception, known as the "successor
employer doctrine" and developed through Puerto Rico common law,
the acquirer rather than the seller is liable for the mesada. See
Rodríguez Oquendo v. Petrie Retail Inc. D.I.P., 167 P.R. Dec. 509,
__ P.R. Offic. Trans. __ (2006). Pursuant to this doctrine, if an
employer unjustly terminates one of its employees and then
transfers the business to a new entity through a sale of assets or
a merger, the previously discharged employee may hold the acquirer
liable for the mesada, even though it was the predecessor entity
that was actually responsible for the unjust discharge. See id.
Thus, the successor employer doctrine permits a plaintiff to seek
the mesada from an entity with which the plaintiff never had any
employment relationship at all.
B. The District Court Decision
Both before the district court and on appeal, López and
Domena have consistently invoked the successor employer doctrine
as their theory of liability. They concede that they were never
"discharged" by Walden, given that Walden never hired them in the
first place, and thus Walden cannot be liable under the traditional
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Law 80 analysis. They also explicitly disclaim reliance on Article
6 of Law 80, acknowledging that the plain text of Article 6
requires a sale of a business. There was no such sale from Akal
to Walden.
Yet the district court limited its analysis to the issues
conceded and disclaimed by López and Domena. Specifically, it
granted summary judgment to Walden because Walden was never López
and Domena's "employer" and thus never discharged them,4 and
because Article 6 of Law 80 does not apply to their case because
there was no sale of a business from Akal to Walden. See López-
Santos, 320 F. Supp. 3d at 343-44. In doing so, the district court
ignored the only theory of liability that López and Domena actually
do advance: the successor employer doctrine. This legal error
requires us to decide whether to remand for the district court to
conduct the proper analysis or to conduct our own legal analysis
of the successor employer doctrine's applicability in the first
instance, given the principle that we may affirm a grant of summary
4 López and Domena argue to us that the district court's
analysis of whether Walden was ever their "employer" improperly
relied on definitions of "employer" and "employee" that were added
to Law 80 by the Labor Reform Act in 2017. For the reasons stated
in footnote 3, we agree. However, this particular error is
immaterial, given the district court's larger error. Put
differently, the district court's misplaced reliance on these new
statutory definitions only came into play in a portion of the
district court's analysis that we find irrelevant.
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judgment on any ground supported by the record. See Robinson v.
Town of Marshfield, 950 F.3d 21, 24 (1st Cir. 2020).
We elect the latter approach. Because there are no
material factual disputes, our analysis is purely legal and
requires no further factfinding by the district court. Moreover,
the successor employer doctrine is so clearly inapplicable to López
and Domena's case that any remand to the district court would be
futile, resulting in a waste of the parties' resources.
C. Application of Successor Employer Doctrine
López and Domena's theory of liability based on the
successor employer doctrine fails for two distinct reasons. First,
the successor employer doctrine is applicable only where a
plaintiff seeks to hold the successor entity liable for a Law 80
violation by the predecessor entity. See Rodríguez Oquendo, 167
P.R. Dec. 509 (citing Piñeiro v. Int'l Air Serv. of P.R., Inc.,
140 P.R. Dec. 343, 40 P.R. Offic. Trans. __ (1996), which held a
successor employer liable pursuant to Law 80 for dismissals that
took place five months prior to the transfer of the business); see
also id. (explaining that the successor employer doctrine allows
a plaintiff "to hold an entity liable for the unfair practices
committed by another" (quoting L.R.B. v. Club Náutico, 97 P.R.
376, 390 (1969)). But here López and Domena do not take issue
with any action by Akal, the prior entity. Rather, they cite
Walden's failure to hire them as the triggering event for their
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Law 80 claim. Thus, the successor employer doctrine simply does
not apply to the situation at bar.
If that were not enough, the successor employer doctrine
is also applicable only where "an employer . . . replaces another
through a transfer of assets or a corporate merger." Id.; see
also id. (holding that the successorship doctrine applies to the
transfer of assets in a federal bankruptcy proceeding, even if
free of liens). In this case, López and Domena concede that Akal
did not sell a business to Walden -- indeed, Akal and Walden had
no relationship with one another other than the fact that they
happened to win the USMS contract in consecutive terms. For this
reason as well, Walden cannot be liable under the successor
employer doctrine.
López and Domena's arguments to the contrary are
unavailing. First, they invoke the multifactor test used to
determine whether the successor business "replaced" the former
business, a requirement for the imposition of successor liability
under the successor employer doctrine. See id. (holding that the
successor business has "replaced" the former business when there
is "a substantial similarity . . . 'in the operation and
continuity of the identity of the enterprise before and after the
change'" (quoting L.R.B. v. Cooperativa Azucarera, 98 P.R. 307,
316 (1970)). The factors examined by Puerto Rico courts include:
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(1) [T]he existence of a substantial
continuation in the same business activity;
(2) the utilization of the same operating
plant; (3) the employment of the same or
substantially the same labor force; (4) to
maintain the same supervisory personnel; (5)
to use the same equipment and machinery and to
employ the same methods of production; (6) the
production of the same products and the
rendering of the same services; (7) continuity
of identity; and (8) the operation of the
business during the transfer period.
Id. (quoting Cooperativa Azucarera, 98 P.R. at 317-18) (alteration
in original). López and Domena argue that because the record
indisputably demonstrates that nearly all of these factors are
satisfied in their situation, we must hold Walden liable as Akal's
"replacement."
We generally agree with López and Domena's
characterization of the record, but that does not win the day for
them. Specifically, the fact that Walden may have "replaced" Akal
within the meaning of this multifactor test does not overcome the
threshold limitations of the successor employer doctrine that we
have already noted. Rather, those formal limitations prevent us
from even applying the multifactor test. To the extent that López
and Domena suggest that their case demonstrates the need to revisit
those formal limitations, that argument also fails. "A litigant
who chooses federal court over state court 'cannot expect this
court to . . . blaze new and unprecedented jurisprudential trails'
as to state law." Doe v. Trs. of Bos. Coll., 942 F.3d 527, 535
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(1st Cir. 2019) (quoting A. Johnson & Co. v. Aetna Cas. & Sur.
Co., 933 F.2d 66, 73 n.10 (1st Cir. 1991)) (omission in original).
Instead, we "must take state law as [we] find[] it: not as it might
conceivably be, some day; nor even as it should be." Kassel v.
Gannett Co., 875 F.2d 935, 950 (1st Cir. 1989) (internal quotation
marks omitted).
López and Domena also gain no benefit from the former5
executive order that they invoke. Executive Order 13,495 mandated
that new federal contractors offer a right of first refusal to all
qualified employees of the previous contractor. See Exec. Order
No. 13,495, Nondisplacement of Qualified Workers Under Service
Contracts, 74 Fed. Reg. 6103 (Jan. 30, 2009). Although the cited
executive order does reflect a federal interest in "a carryover
work force," see id., which arguably might be relevant to the
question of whether López and Domena's discharge was "without just
cause" under Commonwealth law, we never even reach that question
given the futility of López and Domena's successor employer theory
of liability.
5 Executive Order 13,495 was in effect when Walden assumed
the USMS contract in 2015. See Exec. Order No. 13,495,
Nondisplacement of Qualified Workers Under Service Contracts, 74
Fed. Reg. 6103 (Jan. 30, 2009) (previously codified at 29 C.F.R.
part 9). President Trump rescinded Executive Order 13495 in 2019.
See Exec. Order No. 13,897, Improving Federal Contractor
Operations by Revoking Executive Order 13495, 84 Fed. Reg. 59,709
(Oct. 31, 2019).
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Accordingly, we must affirm the district court's grant
of summary judgment. So ordered.
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